Buffett said to be in India reinsurance talks

A day after announcing a foray into the Indian insurance market, Warren Buffett’s Berkshire Hathaway Inc is reported to be looking to enter the Indian reinsurance market.

If sources are to be believed, the $100-billion Berkshire, run by the legendary US investor, is in talks with a domestic general insurance company for a 26 per cent stake.

“We are a major player in the international reinsurance markets, and India is well-recognised as one of the most important emerging markets in the world. The Berkshire Hathaway Reinsurance Division continues to review opportunities in the reinsurance sector in India,” said Kara Raiguel, director of Berkshire India, in reply to an email sent by Business Standard.

“To start with, they are looking to take a 26 per cent stake and going forward, once the insurance amendment Bill is passed by Parliament, they will increase their stake to 49 per cent,” said a source close to the development.

General Insurance Corporation is presently the only reinsurer for the domestic insurance industry and no international company can transact here directly in this segment. Indian regulations prescribe a capital of Rs 200 crore to set up a local reinsurance company, where any foreign direct investment is capped at 26 per cent.

Foreign reinsurance majors like Munich Re, Swiss Re, General Cologn Re and Reinsurance Group of America have liaison offices in India and these cannot directly transact reinsurance business here. It has to refer back all the underwriting, actuarial and claims, to be then handled by the parent company back home.

Yesterday, Berkshire announced its entry in the Indian market by becoming a corporate agent of Bajaj Allianz General Insurance. To start with, the Nebraska-based company will distribute general insurance products in India through its online distribution portal and tele-marketing.

It will focus on motor insurance but it plans to diversify into segments such as property and casualty insurance and reinsurance, utilities and energy, freight rail transportation and finance, the company said in a statement.

“We felt due to the restrictions with FDI investment in insurance companies, the ability to work with Bajaj Allianz General Insurance Company on a direct distribution basis was the best path to enter the Indian retail insurance market,” Raiguel said.

Buffett has been keen on entering the Indian insurance market for quite some time. Last year, during the annual shareholders’ meet, Buffett said he did not rule out India as a possible investment destination for Berkshire investments. There was market speculation about Berkshire taking strategic stakes in an existing Indian general insurance company and about taking stake in Bajaj Finserve.